The Best Media Content I Consumed This Month (February 2023 Edition)
Here's a glimpse into the best articles, podcasts, books, and videos I consumed in February 2023.
Articles
Toto Wolff, The Compulsive Perfectionist Behind Mercedes’s Formula 1 Team. A super interesting and well-researched biography of Toto Wolff, General Manager of the Mercedes F1 Team, which is arguably the most successful F1 team of the 21st century. Learned a ton about his maniacal obsession with cleanliness, hectic travel schedule, lifelong battle with depression, and unconventional route to owning 1/3 of the Mercedes F1 Team (estimated stake of $500m).
Why Don’t We Ever Learn? A brief article from MT Capital Research delving into the common characteristics of three of history’s most prominent fraudsters: SBF, Bernie Madoff, and Adele Spitzeder. MT discusses how these three fraudsters duped investors into handing over their hard-earned money through promises of “assured profits” or exposure to a massive technological breakthrough, and used their large philanthropic endeavours on the side to boost their PR image and distract people from their shonky business dealings.
Modern Meditations: Josh Wolfe. A short but insight-packed interview with Josh Wolfe, the Co-Founder and Managing Partner of Lux Capital. Josh discusses his frameworks for investing in “deep tech”, inspirational historical figures, his favourite non-fiction books (and why he recently began reading more fiction), and a non-PC take on downsides of the “environmentalist” movement. Josh is one of the most intelligent thinkers I follow in VC and anytime I see an article/interview with his name on it, I basically drop everything I’m doing and devour it straight away.
Higher Rates Will Lead to the Next Generation of Great Tech Startups. A thought-provoking article by Chamath Palihapitiya (Founder and Managing Partner of Social Capital) discussing why a surprisingly large number of generational businesses (e.g., Airbnb, Uber) were founded during or slightly after market downturns. I have some other theories as to why this phenomenon occurs: (1) the tougher the economic conditions, the more people are likely to be made redundant or receive smaller bonuses, which means people have more spare time and/or are motivated to start a business and earn extra income, (2) there is inherently less competition as competitors go out of business due to a higher cost of capital, and (3) as larger businesses begin to “tighten their belts” and reduce sales and marketing expenses, the cost of customer acquisition decreases, making it easier for upstarts to cheaply acquire new customers through sales and marketing.
Podcasts
Investing in Sports Teams at Arctos Sports Partners (Capital Allocators). This was one of my all-time favourite podcasts. It’s an interview with two Managing Partners at Arctos Sports Partners, a $2.1b fund dedicated to purchasing minority stakes in professional sports franchises. Current holdings include the Golden State Warriors, Sacramento Kings, and Boston Red Sox. Learnt a ton from this episode but here are some of the highlights: (1) US sports leagues largely prohibited institutional ownership of sports teams until only a few years ago, (2) sports teams generate revenue primarily from media rights, but also real estate (e.g., stadiums), and hospitality (e.g., ticket sales, food, drinks), (3) leagues place severe restrictions on how much debt can be used to fund the purchase of a sports team, and (4) owners are prohibited from using their ownership stake as collateral to prevented forced selling.
Christopher Joye: the RBA got it wrong, now it will crush housing, growth and the consumer (The Rules of Investing). A super in-depth interview with Chris Joye, Founder and CIO at Coolabah Capital and one of the most knowledgeable macro/bond investors in the AUS market. Chris talks through his prediction that national house prices will drop 15-25% from peak-to-trough, the severe negative impact recent rate rises will have on consumer spending, and how his firm uses a quantitative approach to identify short-term mispricing in bonds.
Constellation Software: Principled, Profitable, Permanent (Business Breakdowns). A fascinating breakdown of one of the best-performing stocks of the past 15 years (Constellation has compounded at a 34% IRR and increased 130-fold since its IPO in 2006). Constellation is a serial acquirer of vertical market software businesses, primarily focused on the transit and healthcare industries, with a super decentralised organisational structure. Their ideal acquisition size is <$10m with a multiple of 1-2x revenue. Unbelievable that such a simple, decentralised concept has created so much wealth in such a short space of time.
Orlando Bravo (20VC Podcast). A tremendous podcast with Orlando Bravo, Co-Founder and Managing Partner of Thoma Bravo, the largest software-focused PE firm in the world. Orlando has an incredible gift at distilling complex concepts down to their simplest elements and presenting a level-headed analysis of current market conditions. This interview covered his career progression, the importance of separating large businesses into smaller business units to achieve operational excellence, what Thoma Bravo looks for in prospective software investments, and maintaining work-life balance.
Books
What It Takes: Lessons in the Pursuit of Excellence. This month I re-read this classic autobiography by Stephen Schwarzman, Co-Founder and CEO of The Blackstone Group, the largest alternative asset manager in the world. It’s an incredible insight into the upbringing and career of someone with a $20b+ net worth and arguably as much political power as the heads of most countries. I particularly enjoyed hearing about Steve’s struggles during the early days of Blackstone to raise capital and his experience of living through a 90% drop in Blackstone’s share price during the GFC. My main takeaways were: (1) it’s better to go for a hard challenge with a big reward because it’ll likely take a similar amount of effort as achieving a smaller goal and (2) the importance of hiring only 10s (and never settling for 8s or 9s) to lead large projects.
YouTube
These Succession opening theme spin-offs on YouTube crack me up. Here’s one for Mr. Controversial, Donald Trump.
I definitely have a guilty pleasure for watching luxury real estate videos on YouTube. Here’s a tour of one of the most expensive homes ever sold in Colorado by my favourite real estate YouTuber, Erik Conover.
Interesting thread from Jeremy Giffon (an investor at Tiny, a holdings company of internet businesses) about his lessons learned from working at Tiny for the past eight years. My favourite takeaways were: (1) the best investments are obvious within a few minutes, (2) the best investors ask the simplest questions, (3) the best CEOs make you feel energised (rather than drained) after a conversation, and (4) there is no excuse for a business with little marginal cost to not be profitable. Great reminder of the importance of drilling into the basics and remembering the fundamentals tenets of business value (e.g., high-quality business model, high returns on capital, strong free cash flow margins, etc).
Another interesting thread on why funds that aggressively deployed all their capital in the recent tech bubble from 2020-2021 may suffer over the next few years.
Companies I’m Researching
Baidu (NASDAQ:BIDU) – also called the “Google of China”. Baidu has a dominant market share of search in China and also has several other interesting business lines, such as cloud services, driverless cars (approved for ride-sharing purposes in many regions in China), and other AI initiatives (including a ChatGPT competitor). The business has an incredible $25b+ cash position on a market cap of <$50b. In their Q4 results, they announced a $5b share buyback program while also aggressively investing in their AI capabilities. I’ll likely add to my position sometime over the next few weeks.
Please share your favourite media content from February!
Cheers,
Jordan